For these reasons, and for the reasons given by my noble and learned friends Lord Woolf and Lord Millett with which I agree, I would reject the appellants' argument on this point.

Article 5(1) of the Convention

I turn now to the second question which has been raised in this appeal. It is whether the respondents' claims for declarations that they are entitled to avoid the reinsurance contracts fall within the special jurisdiction in Title II, Section 2, Article 5(1) of the Lugano Convention. In this paragraph of Article 5 it is provided that a person domiciled in a Contracting State may, in another Contracting State, be sued:

"1. in matters relating to a contract, in the courts for the place of performance of the obligation in question; in matters relating to individual contracts of employment, this place is that where the employee habitually carries out his work, or if the employee does not habitually carry out his work in any one country, this place shall be the place of business through which he was engaged."

The respondents' case is that that they were induced to enter into the reinsurance contracts by the misrepresentation and non-disclosure of material facts. They maintain that the appellants were in breach of the duty of good faith which the parties to a reinsurance contract owe to each other during the negotiation of the contract. Paragraph 8 of the agreed Statement of Facts and Issues states that the claim concerns the appellants' duty to make a fair presentation of, and not to misrepresent, the risk to the respondents. The question is whether an action in which a breach of duty during pre-contract negotiations is alleged falls within the special rule of jurisdiction in Article 5(1). If it does, the respondents will be entitled to sue the appellants in London where the contracts were made and not in Sweden which is the place of the appellants' domicile. The respondents' domicile is in London. So the effect will be to substitute the courts of the respondents' domicile for the general jurisdiction in Article 2 which provides that persons are to be sued in the courts of their domicile.

For the special rule in Article 5(1) to apply, two requirements must be satisfied by the claimant who seeks to bring himself within the rule. First, the subject matter of his action must fall within a particular category. It must be a matter "relating to a contract". If it is not, it may be possible for the claimant to bring himself within one of the other rules in Article 5. In this case, as an alternative, the respondents seek to invoke Article 5(3) which applies to "matters relating to tort, delict, or quasi-delict." I shall deal with Article 5(3) at a later stage in this judgment. As for Article 5(1), if the initial question as to whether the claim is a matter "relating to a contract" is answered in the affirmative, a second requirement must then be satisfied. The place of performance of "the obligation in question" must be identified. This is the requirement which determines the place where the defendant may be sued in matters relating to a contract. So it must be possible to identify an "obligation," and then to identify the place for its performance. As Article 5(1) deals with matters relating to a contract, and not with tort, delict or quasi-delict which are the subject of a different rule in Article 5(3), it would seem to follow that the obligation in question must be a contractual one.

The fact that these two requirements raise different issues which must be considered separately is clearly demonstrated by three cases in which Article 5(1) has been considered under the national law. Kleinwort Benson Ltd v. Glasgow City Council [1999]1 A.C. 153 was concernedonly with the first requirement, as to whether a claim for unjust enrichment fell within Article 5(1) as being in "matters relating to a contract". As it was held that this requirement was not satisfied, it was not necessary for their Lordships to consider the application to the facts of that case of the second requirement. In Bank of Scotland v. Seitz, 1990 S.L.T. 584, on the other hand, it was the second requirement only that was in issue. The claim was brought for payment under two letters of guarantee. No express provision had been made in the letters of guarantee as to the place where any payments due under them was to be made. There was no dispute that the claim raised "matters relating to a contract", nor was it disputed that the obligation to make payment was an "obligation" withinthe meaning of Article 5(1). The dispute was as to whether the place of performance of that obligation was in Scotland. In Industrie Tessili Italiana Como v. Dunlop A.G. (Case 12/76) [1976] E.C.R. 1473, 1485, paragraphs 13-14 the European Court stated that the place of performance was to be determined by national law. So the Court of Session applied the legal implication under the law of Scotland that the debtor was bound to tender payment to his creditor at the creditor's residence or place of business. In Boss Group Ltd. v. Boss France S.A. [1997] 1 W.L.R. 351 both requirements were in issue. Saville L.J. dealt first with the question whether the claim raised "matters relating to a contract." Having answered that question in the affirmative, he then dealt separately with the obligation which was in question and the place for its performance.

In most cases in which a claimant is seeking a remedy under a contract the application of the special rule in Article 5(1) will be quite simple. He will normally be seeking a remedy for a failure to perform one of the obligations which were created by the contract. The task of the court will be to identify the place where that obligation was to be performed having regard to the express terms of the contract, and if there is no express term, such legal implications relating to that issue as may be relevant: see Bank of Scotland v. Seitz, 1990 S.L.T. 584. In this case the respondents seek to avoid the contracts which they entered into. So it is relatively easy to see that their claim raises "matters relating to a contract" and that the initial requirement for the application of the special rule in Article 5(1) is satisfied. The question raised by the second requirement, as to whether the "performance of [an] obligation" is in question, is more difficult. This is because the "obligation" on which the respondents seek to rely is a duty which had to be fulfilled at or before the stage when the contracts were being entered into. Neither side has sought to identify the place of performance of any of the obligations which were created by the contracts, the performance of which was due after they were made.

The relevant part of the special rule in Article 5(1) is in identical terms to the equivalent rule in the Brussels Convention. Having regard to Protocol No. 2 to the Lugano Convention on the Uniform Interpretation of the Convention, to chapter 1.1.2 of the Report on the Lugano Convention by Mr. P. Jenard and Mr. G. Möller which refers to the various Reports on the Brussels Convention where the provisions of the Brussels and Lugano Conventions are identical and to the Declarations of E.F.T.A. and the European Union States dated 16 September 1988, it is plain that these provisions should receive a common interpretation and that where provisions in the Lugano Convention are in issue decisions of the European Court of Justice on identically worded provisions in the Brussels Convention should be applied. Reference may also be made to the Report by Mr. P. Jenard on the Brussels Convention (O.J. 1979 C59/22). The question as to the application of the special rule in Article 5(1) which has been raised in this case is not dealt with directly in the Jenard Report, nor has it been the subject of any decision by the European Court of Justice under the Brussels Convention. But it must be answered, so far as possible, in conformity with the jurisprudence relating to the Brussels Convention. So I think that it is appropriate first to see what guidance can be obtained from that jurisprudence, before applying Article 5(1) to the claims which are being made in this case.

The background to special rule in Article 5(1) is described in the Jenard Report at pp. C59 22/24. Two initial points are made. The first is that by laying down the special rules of jurisdiction the Committee intended to facilitate the implementation of the Brussels Convention. This has been done by enabling a claimant to sue without having to take the internal laws of the State into consideration. The Convention itself determines which court has jurisdiction. The second is that the adoption of special rules is justified by the fact that, for the special rule to apply in place of the general rule of jurisdiction based on domicile, there must be a close connecting factor between the dispute and the court with jurisdiction to resolve it. From these passages I infer that the intention was, in order to achieve certainty, that the special rules should be capable of being applied uniformly by all member States without regard to their own internal laws of jurisdiction. For this to be done it was necessary that they should identify in clear and simple language the situations in which they could be applied.

In the discussion which follows about Article 5(1) it is explained that there were great differences between the laws of the six member States in their attitude to the jurisdiction of the forum contractus. Some did not recognise this jurisdiction at all, while others differed as to whether jurisdiction belonged to the courts for the place where the obligation arose or the place where the obligation had been performed or the place where the obligation was to be performed. The important passages in this discussion are these:

"Article 5(1) provides a compromise between the various national laws.

The jurisdiction of the forum is, as in German law, limited to matters relating to contract. It could have been restricted to commercial matters, but account must be taken of the fact that European integration will mean an increase in the number of contractual relationships entered into. To have confined it to commercial matters would moreover have raised the problem of classification.

Only the jurisdiction of the forum solutionis has been retained, that is to say the jurisdiction of the courts for the place of performance of the obligation on which the claim is based. The reasons for this are as follows."

The first reason was that it would be unwise to give jurisdiction to a number of courts, and thus possibly create conflicts of jurisdiction. The second was that to recognise also the jurisdiction of the place where the obligation arose would involve very considerable changes for those States which did not recognise that forum, or did so only with certain restrictions. The third reason was expressed in these terms:

"There was also concern that acceptance of the jurisdiction of the courts for the place where the obligation arose might sanction, by indirect means, the jurisdiction of the forum of the plaintiff. To have accepted this forum would have created tremendous problems of classification, in particular in the case of contracts concluded by parties who are absent."

It seems to me that these passages indicate, first, that the phrase "matters relating to a contract" should be interpreted as extending to all matters in which a remedy is sought which can be identified as a contractual remedy. Clearly a claim for the performance of an obligation which was created by a contract between the parties will fall within this description. But the phrase may be capable of being applied to other contractual remedies. For example, where a party has been induced to enter into a contract by a misrepresentation which was fraudulent, he has a choice of remedies. He may decide to sue for damages, in which case his remedy may be founded in tort or delict. Or he may decide to reduce or to rescind the contract so that he is no longer bound by it, in which case his remedy will be contractual.

The Jenard Report supports the view that the claims which the respondents make in this case fall within the opening words of Article 5(1) as matters "relating to a contract". Their claim is to be released from the reinsurance contracts, thus depriving the appellants of their right to call for performance of them according to their terms. If they are not released from them, the respondents will be in a position when the time comes to enforce the contracts against them by means of the usual contractual remedies. But it suggests, contrary to the respondents' argument, that the phrase "performance of the obligation in question" refers to the performance of an obligation which arose under the contract. This is indicated by the discussion as to the choice which had to be made between giving jurisdiction to the courts for the place where the obligation arose and those where the obligation had been or was to be performed. It is also indicated by the use of the expression forum solutionis to describe the jurisdiction of the courts for the place of performance of the obligation on which the claim is based.

The noun solutio as used in the expression forumsolutionis means, literally, "loosening," and the verb solvere from which it is derived means "to untie". More particularly, solutio means release from an obligation which has been created by a contract. The term "obligation" is widely used in the civilian systems to refer to the relationship which exists between a party who has a right to claim on the one hand and a party who has a duty to render performance on the other: Reinhard Zimmermann, The Law of Obligations (1990), p. 1. In the contractual context, the sense conveyed by the use of the word solutio is that of the debtor's release from his obligation by performing what he was obliged to do. Performance of the obligations undertaken by the parties under their contract is one of the recognised means by which those obligations are extinguished or come to an end: Zimmermann, op. cit., p. 748-750. The use of the word "obligation" in this context suggests that what the Committee had in mind throughout their discussion was the obligations express or implied which the parties undertake to each other under their contract, not duties which the law imposes upon them when the contract is under negotiation and before it is made.

As my noble and learned friend Lord Millett explains, the ordinary meaning of the word "obligation" extends to implied terms as well as to those for which the parties have made express provision in their contract. It is immaterial whether these implied terms are made part of the contract by the common law or by statute. All these terms, whether express or implied, are "contractual obligations," because they are created by or arise out of the agreement between the parties when they enter into the contract which they have made. So there is no reason to think that the Committee intended to confine the use of the word "obligation" in Article 5(1) to the express provisions of the contract. But it does not follow from the fact that contractual obligations include those which are implied as well as those which have been included in the contract as express terms that the implied duty of good faith on which the respondents rely in this case is correctly described as a contractual obligation. The duties which the law implies at the stage when parties are in negotiation or are in the process of entering into the contract, and which must be fulfilled by the date when the contract is entered into, fall into an entirely different category from the obligations which are created by or arise from the contract when it is made. Contractual obligations do not bind the parties until the contract has been entered into.

The jurisprudence of the European Court of Justice lends further support to the view that when Article 5(1) uses the word "obligation" in the context of matters relating to a contract it means an obligation which one party has undertaken to perform to the other under the contract. Obligations may be classified by a civilian system into those which arise by force of law, those which arise from a wrongful act and those which depend for their existence on an expression by the obligor of his intention to be bound: T.B. Smith, A Short Commentary on the Law of Scotland (1962), p. 281. The obligations in the third category, which are commonly referred to as voluntary obligations, are those which are created by a contract. They include all the terms, express and implied, which the parties have undertaken to perform to each other under their contract. It is normal to describe those obligations as contractual obligations, as the Court has done from time to time in its decisions on the Brussels Convention.

"Having regard to the differences obtaining between national laws of contract and to the absence at this stage of legal development of any unification in the substantive law applicable, it does not appear possible to give any more substantial guide to the interpretation of the reference made by Article 5(1) to the 'place of performance' of contractual obligations. This is all the more true since the determination of the place of performance of obligations depends on the contractual context to which these obligations belong."

The advocate general said in that case at p. 1488 that preparatory work, commentaries by legal writers and the text of the Convention showed clearly that its authors had opted for the criterion of the "place where the obligation has been or is to be performed" and that they considered performance to be the ingredient which best distinguished the transaction as a whole.

The Court was concerned in Tessili with the seller's obligation of delivery. That was plainly a contractual obligation which was created by or arose from the contract, the performance of which was due after the date when the contract was entered into. It did not have to consider the question whether a duty which had to be performed at or before the stage of entering into the contract was an "obligation" within the meaning of Article 5(1). But the whole discussion proceeded on the basis that the obligations with which the special rule in Article 5(1) is concerned are those which fall to be performed under the contract - that is to say, obligations which can properly be described as "contractual obligations" because they were created by or arose under the contract when it was made. In Custom Made Commercial Ltd v. Stawa Metallbau G.m.b.H. (Case C-288/92) [1994] E.C.R. I-2913, at p. 2957, paragraph 23 the Court noted that it had ruled in previous cases that the obligation in Article 5(1) cannot be interpreted as referring to any obligation whatsoever arising under the contract in question, but rather that which corresponds to the "contractual right" on which the plaintiff's action is based. The obligation mentioned in Article 5(1) has been consistently described in the decisions of the Court as being a reference to "contractual obligations": see Martin Peters Bauunternehmung G.m.b.H. v. Zuid Nederlandse Aanemers Vereniging (case 34/82) [1983] E.C.R. 987, p. 1002, paragraph 12; Hassan Shenavai v. Klaus Kreischer (case 266/85) [1987] E.C.R. 239, p. 256, paragraph 17; Arcado S.P.R.L v. HavilandS.A. (case 9/87)[1988] E.C.R. 1539, p. 1555, paragraph 13; and Handte (Jakob) & Co. G.m.b.H v. Traitements Mécano-chimiques des Surfaces S.A. (case C-26/91) [1992] E.C.R. I-3967, p. 1-3995, paragraph 17.

The Court has followed the same line in two recent judgments on the interpretation of Article 5(1). In GIE Groupe Concorde and Others v. The Master of the Vessel Suhadiwarno Panjan and Others, 28 September 1999 (Case C-440/97), the Court said this in paragraphs 11-13, 26 and 28 of its judgment:

"11. As far as possible, the Court of Justice gives the terms used in the Brussels Convention an autonomous interpretation, rather than by reference to national law, so as to ensure that the Convention is fully effective, having regard to the objectives of Article 220 of the E.C. Treaty (now Article 293 E.C.), in the implementation of which the Convention was adopted (Case C-125/92 Mulox I.B.C. v. Geels [1993] E.C.R.-I-4075, paragraph 10).

"12. The Court has, however, made it clear that neither option excludes the other, since the appropriate choice can only be made in relation to each of the provisions of the Brussels Convention (Tessili, paragraph 11, and Case 144/86 Gubisch Maschinenfabrik v. Palumbo [1987] E.C.R. 4861, paragraph 7).

"13. As regards the expression 'place of performance of the obligation in question', the Court has repeatedly ruled that this expression is to be interpreted as referring to the law which governs the obligation in question according to the conflict rules of the court seised (Tessili, paragraph 134, and Case C-288/92 Custom Made Commercial v. Stawa Metallbau [1994] E.C.R. I-2913, paragraph 26).. . .

"26. Some of the questions which might arise in this context, such as identification of the contractual obligation forming the basis of proceedings, as well as the principal obligation where there are several obligations, could hardly be resolved without reference to the applicable law. . . .

"28. Moreover, bearing in mind the important position generally accorded by national contract law to the intention of the parties, the Court has held that, if the parties to the contract are permitted by the applicable law, subject to the conditions it lays down, to specify the place of performance of an obligation without satisfying any special condition of form, that agreement on the place of performance is sufficient to found jurisdiction in that place within the meaning of Article 5(1) of the Brussels Convention (Case 56/79 Zelger v. Salinitri [1980] E.C.R. 89, paragraph 5), on condition that this place has a real connection with the true substance of the contract (Case C-106/95 M.S.G. v. Gravieres Rhènanes [1997] E.C.R. I-911, paragraphs 30 and 31)."

The references in paragraph 28 of GroupeConcorde to the "intention of the parties" and to the place which has a real connection with the "true substance of the contract" seem to me to confirm the impression which I would draw from the earlier authorities that when the court uses the expression "contractual obligation" it has in mind obligations which were created by or arose under the contract, not duties which were to be performed at or before the stage when it was entered into. As for the discussion in paragraphs 11 to 13 and 26 about the circumstances in which reference may be made to the law which governs the contract, it seems to me these observations indicate that a distinction must be made between those questions which may properly be referred to the law of the contract, such as what is the obligation in question and what is the place for its performance, and questions which relate to the interpretation of one of the terms used in Article 5(1) of the Convention, such as what is meant by the word "obligation" in that Article.

The issue in the present case relates to the interpretation of one of the terms used in Article 5(1) of the Convention. As paragraph 11 of the judgment in GroupeConcorde indicates, it should be given an autonomous interpretation as far as possible. This is to ensure its uniform application in all member states under Article 293 of the E.C. Treaty (ex Article 220). That is an entirely different exercise from that which approaches the matter by examining the meaning of the words used through the eyes of the English lawyer. It is clear that this how the matter must be approached where the issue is raised as one of national law under the statute. Professor A.E. Anton, Private International Law (2nd ed., 1990), p. 183 states that the characterisation of an obligation as being contractual or otherwise in Rule 2(2) of Schedule 8 to the Act of 1982, which sets out the rules as to jurisdiction in Scotland, is a matter for Community rather than for national law. At p. 319 he observes that the question whether or not an obligation is to be considered to be a contractual one for the purposes of the E.C. Convention on the law applicable to Contractual Obligations (O.J. 1980, L266) is likely to be regarded not as a matter of characterisation referable primarily to the court deciding the matter but as a matter going to the scope of the Convention. As such, it is properly to be decided by the European Court as a matter of Community law. I would take the same view of the question as to the meaning of the word "obligation" in Article 5(1) in the Lugano Convention. As this is a matter which goes to the scope of the special rule rather than its application to particular circumstances, it is a question which ought to be decided in the same way as if it had been raised a matter of Community law under the Brussels Convention.

In Leathertex Divisione Sintectici SpA v. Bodetex B.V.B.A., 5 October 1999 (Case C-420/97) the Court referred, in paragraph 31 of its judgment, to paragraphs 8, 9 and 10 of the judgment in De Bloos v. Bouyer where it held that the objectives of the Convention implied the need to avoid, so far as possible, creating a situation in which a number of courts had jurisdiction in respect of one and the same contract and that Article 5(1) of the convention could not therefore be interpreted as referring to any obligation whatsoever arising under the contract in question. In the concluding part of paragraph 31 and in paragraph 32 it said this:

"31. . . . The Court concluded, in paragraphs 11 and 13 of the same judgment, that, for the purposes of determining the place of performance within the meaning of Article 5(1), the obligation to be taken into account was that which corresponded to the contractual right on which the plaintiff's action was based. It stated in paragraph 14 that, in a case where the plaintiff asserted the right to be paid damages or sought dissolution of the contract on the ground of the wrongful conduct of the other party, that obligation was still that which arose under the contract and the non-performance of which was relied upon to support such claims.

"32. This interpretation was corroborated by the Convention of 9 October 1978 on the Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland, which amended certain language versions of Article 5(1) of the Convention in order to specify that the obligation whose place of performance determines which court has jurisdiction in matters relating to a contract is the obligation which forms the basis of the claim (in the English version 'the obligation in question')."

The references in paragraph 31 to the "contractual right" and to the obligation "which arose under the contract" are consistent with the indication which has been given repeatedly by the European Court in previous judgments that the word "obligation" in Article 5(1) means a contractual obligation properly so called because it was created by or arose under the contract when it was made.